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NAR: Declining Prices Will Spur Sales?

Thats a pretty weak position to take.

Over the past 12 months, the National Association of Realtors trade group has extolled the strength of the housing market and spun this assessment until aparrently it can’t spin anymore.

David Lereah, their Chief Economist, who released the NAR Pending Home Sales Index which showed dropping volume [WSJ] [1]. He finally asserted that sales prices would decline slightly over the next few months.

Sales have stalled partly because “the sellers are not bringing prices down fast enough,” Mr. Lereah said. “They’ve been very stubborn.” A drop of 5% to 10% in California and southern Florida “probably would be enough to bring sales back,” he said.

“The quicker we can get negative prices, the quicker we can get sales coming back,” Mr. Lereah said.

Source: WSJ

Now the sellers are to blame?

The number of transactions will not increase until buyers sense that prices have stabilized. Lereah is clearly wrong on his take. Its not some erroneous magic number for prices to fall like 5% or 10% so that volume will pick up. Who knows what the number is? It might be higher or lower than that. It might be 0 for all we know.

Buyers simply want safety and affordability and hat varies by market.

To recap: falling prices do not stimulate people to buy. Prices fall when buyers are not buying.